India's GDP growth projected at 7% in Q2 FY26, lower than Q1's: ICRA

It also projected the gross value added (GVA) growth at 7.1 per cent in Q2 FY26 from 7.6 per cent in Q1.

The gap between the GDP and the GVA growth is expected to revert to the negative territory at close to 10 basis points (bps) in Q2 FY26, after being positive (18 bps) in the previous quarter.

“A lower YoY rise in government spending is likely to weigh on the pace of the GDP and GVA growth in Q2 FY26 compared to Q1 FY26. However, inventory stocking related to the early onset of the festive season, enhanced by the GST [goods and services tax]-rationalisation induced volume pickup, and upfronting of exports to the US ahead of the tariffs, are expected to boost the performance of the manufacturing sector, and help industry GVA growth outpace that of the services after a gap of four quarters,” Aditi Nayar, chief economist and head of Research and outreach at ICRA, said in a release.

Unless the government’s capital expenditure allocation is enhanced and the tariff-related uncertainties ebb, the GDP growth appears set to ease below 7 per cent in the second half (H2) FY26, she noted.

“While the well-timed GST rationalisation may result in a steady boost in volumes of consumer non-durables going ahead, consumer durables may see a trend of premiumisation instead of a sustenance of the spike in volumes that was seen during the festive season,” she added.

Manufacturing GVA growth is expected to have risen to a six-quarter high of 9 per cent in Q2 FY26 (plus 2.2 per cent in Q2 FY25) from 7.7 per cent in Q1 (plus 7.6 per cent in Q1 FY25), ICRA added.

ALCHEMPro News Desk (DS)